The following is an auditors question and the company accountant response:A

Auditors question: We noticed that you had two separate transactions to purchase debt and equity securities, respectively. Are the securities recorded at market value on the books at year-end? Please provide a list of the securities, giving the original cost, the number of equity shares purchased, and the year-end market value of each investment so that we can verify the balance sheet values.

Accountants response to auditor: We purchased preferred stock from American Electric Power (AEP) and Cascade Energy bonds, both over the counter. I recorded them at the amount we paid for them. The market values for each at year-end are listed in this schedule:

Equity shares number of shares cost Market value

AEP 1,600 $214,880 $215,645

Bonds

Cascade Energy Bond $100,000 $ 98,700

The following are the entries the accountant made during the year

205 Debt Securities-AFS Marketable $100,000

101 Cash $100,000

To purchase Cascade Energy bond investment

201 Equity securities-long term marketable $214,880

101 Cash $214,880

To record purchase of AEP preferred stock shares

101 Cash $6,400

804 Dividend income -marketable sec sect-long term $6,400

To record AEP dividend income

101 Cash $1,500

750 Interest Revenue - AFS Debt Sec $1,500

To record receipt of semi-annual interest on AFS bond investment

PLEASE PROVIDE THE IRAC ANALYSIS FOR THIS PROBLEM INCLUDING THE TAX CODE (fasb, fas etc). It should be in the following format

Issue:

Rule:

Analysis

Conclusion:

Also please provide the correcting or adjusting entries based on the entries above